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LAW OF MONGOLIA ON COMBATING MONEY LAUNDERING AND TERRORISM FINANCING

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LAW OF MONGOLIA
8 July 2006 Ulaanbaatar City
ON COMBATING MONEY LAUNDERING
AND TERRORISM FINANCING
CHAPTER ONE
General provisions
Article 1. Purpose of the Law
1.1. The purpose of this Law is to combat and prevent money laundering and
terrorism financing.
Article
2. Legislation
2.1. The law on combating money laundering and terrorism financing shall
consist of the Constitution of Mongolia,
the Criminal Code, this Law and
other legal acts adopted in conformity with these laws.
2.2. If an international treaty to which
Mongolia is a party is inconsistent with
this Law then the provisions of the international treaty shall prevail.
Article 3. Definitions
of terms
3.1. The meaning of the following terms used in this Law shall be as follows:
3.1.1. "money laundering" means to conduct
a transaction that involves
assets, knowing that they were obtained by illegal means, in order to
legalize the right to possess,
use or dispose of these assets and to
conceal the sources of these assets.
3.1.2. "terrorism financing" means to accumulate, transfer
or use assets in
any form knowing that these assets are intended to be used for
terrorism financing.
3.1.3. "reporting entity" refers
to the natural or legal persons, described in
Article 4 of this Law.
3.1.4. "assets derived from illegal activities" means assets
derived from
committing less grave, grave and exceptionally grave offences other
than those described in Article 166 of the Criminal
Code.
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3.1.5. "suspicious transaction" means a transaction that involves funds with
no clear source or recipient or a transaction
that is conducted via a
country that does not have a financial monitoring mechanism to
combat money laundering and terrorism financing
or a transaction that
is suspected of money laundering and terrorism financing.
3.1.6. "cash transaction" means a transaction involving
local and foreign
currency as well as checks, bills and securities widely used in
international settlement.
3.1.7. "suspension of
transaction" means to suspend a transaction to enable
the FIS to determine if the transaction is related to money laundering
or terrorist
financing.
3.2. The Governor of the Bank of Mongolia shall, pursuant to Provision 3.1.5 of
this Law, prepare a list of countries,
that do not have a financial monitoring
mechanism to combat money laundering and terrorism financing,.
CHAPTER TWO
Preventive measures
Article 4. Reporting entities
4.1. The following natural or legal persons, (Reporting Entities), shall report to
the Financial Information
Service on transactions described in Article 7 of
this Law.
4.1.1. banks;
4.1.2. non-bank financial institutions;
4.1.3. insurance
companies;
4.1.4. licensed securities market entities ;
4.1.5. natural or legal persons conducting pawnbroker activities;
4.1.6.
savings and credit cooperatives;
4.1.7. natural or legal persons conducting foreign currency exchange
activities;
4.1.8. Natural
or legal persons conducting gambling activities.
4.2. The natural or legal persons, other than those described in Article 4.1 of
this
Law, may report to the Financial Intelligence Unit any transactions that they
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suspect of money laundering or terrorism financing
or any cash transactions
of 20 million togrogs (or equivalent foreign currency) or above.
4.3. Reporting entities shall not open
an anonymous or numbered account or an
account in fictitious names, or make a transaction from or to such accounts,
or use closed
accounts.
Article 5. Examination of information on customers
5.1. Reporting entities shall obtain customer information in the following
cases:
5.1.1. prior to providing a financial service;
5.1.2. prior to conducting a transaction equal to or more than 20 million
togrogs
(or equivalent foreign currency);
5.1.3. if the total sum of several inter-related transactions is 20 million
togrogs (or equivalent
foreign currency) or above, the individual value
of any of these transactions is less than the threshold specified in
Article 5.1.2,
and there is a ground to suspect that the transactions are
conducted with the intent to avoid the reporting requirement of
Provision 5.2 of this Law.
5.1.4. if there is a need to verify the accuracy of previously obtained
information on customers;
5.1.5. prior to conducting an international
settlement transaction;
5.1.6. if there are other grounds to suspect that the customer or the
transaction is involved with money
laundering or terrorism financing;
5.2. Reporting entities shall obtain the following information from their
customers:
5.2.1. if
the customer is an individual, his or her father's or mother's name,
given name, registration number, residential address, contact
phone
number, and a notarized copy of citizen's identity card;
5.2.2. if the customer is a legal entity, name of the entity, its
address, national
registration and tax payer number, contact phone number, a notarized
copy of its national registration certificate,
and detailed information on
its management;
5.2.3. information on purposes and beneficiaries of transactions;
5.2.4. information
about people who made wire transfers.
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5.3. If a customer refuses to provide the information provided for in Article 5.2
of this
Law reporting entities shall be obliged to refuse to open an account,
to conduct a transaction, or to provide other financial services.
5.4. Reporting entities Law shall update, within one year, the information on all
customers with whom it had established financial
relationships prior to the
adoption of this Law in conformity with the requirements of Article 5.2 of
this Law.
Article 6. Transactions
of special monitoring
6.1. Reporting entities shall undertake special monitoring of the following
transactions:
6.1.1. transactions
equal to or more than 20 million togrogs (or equivalent
foreign currency);
6.1.2. transactions with no clear purpose;
6.1.3. transactions
made via countries listed pursuant to Provision 3.2 of this
Law;
6.1.4. transactions that have no adequate information on the entity
or the
individual who undertook or who had someone undertake a wire
transfer;
6.1.5. transactions conducted in the name of a public
official or a political
party leader from a country listed country pursuant to Provision 3.2 of
this Law.
6.1.6. transactions that
are different from the customer's previous
transactions and that have no clear purposes;
6.2. Reporting entities shall undertake
all possible measures, to obtain additional
information or an explanation of the transactions described in Article 6.1 of
this Law.
Article 7. Reporting on suspicious transactions
7.1. Reporting entities shall report to the Financial Information Service on cash
transactions pursuant to Articles 5.1.2, 5.1.3 and 5.1.5 of this Law.
7.2. The relevant information together with its documentation
shall be submitted
to the Financial Information Service in the prescribed form within 7 working
days after conducting a transaction
described in Provision 7.1 of this Law or
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within 24 hours if there is a ground to suspect that the transaction involved
has the
intent of money laundering or terrorism financing.
7.3. Reporting entities shall deliver the information to the Financial Information
Service by fax, in electronic form or in writing and it should be confirmed
immediately by fax or in writing if the information was
delivered by phone.
7.4. If the authorities make a written request to a reporting entity, it shall provide
information to them on
specific transactions and their participants in
accordance with the procedure jointly adopted by the Governor of the Bank
of Mongolia
and the Prosecutor ­ General on providing information.
Article 8. Retaining the information and documentation on customers
8.1. Reporting
entities shall retain, for not less than 5 years, information and
documentation on customers' transactions and closed accounts.
Article
9. Information on suspicious transactions
9.1. The following information on suspicious transactions shall be submitted to
the Financial
Information Service:
9.1.1. name and addresses of the reporting entity and the identity of the
officials who submitted the information;
9.1.2. information
on customers and beneficiaries;
9.1.3. information on purpose, value, form, date, account number, account
holder and participants
of the transaction;
9.1.4. brief explanation of grounds and circumstances to suspect the
transaction;
9.1.5. other related documents.
Article 10. Monitoring of accounts
10.1. If there are grounds to suspect that the account(s), mentioned in the reports
from reporting
entities, are being used for money laundering or terrorism
financing, then the Financial Information Service may monitor the
account(s).
Article 11. Suspension of transactions
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11.1. If there are grounds to suspect that the transaction(s) has or will be made by
clients
for the purpose of money laundering or terrorism financing, then the
Financial Information Service may decide to suspend the transactions.
11.2. A decision to suspend a transaction shall be delivered to the reporting entity
in writing, or, if this is not possible, by
phone and the written decision shall
be delivered within 24 hours.
11.3. The suspension of a transaction shall not exceed three working
days and the
Financial Information Service shall undertake the following measures during
this period:
11.3.1. obtain necessary information
from related local and foreign
institutions;
11.3.2. if the established facts are sufficient grounds to suspect that the given
transaction(s)
had the purpose of money laundering or terrorism
financing, then it shall be reported to the relevant authorities and the
related
documents shall be sent to those parties for investigation;
11.3.3. if it is established that the given transaction(s) did not have
the purpose
of money laundering or terrorism financing, then the suspension
decision shall be annulled and the reporting entity shall
be immediately
informed.
Article 12. Relieving from liabilities
12.1. The provision of reports by reporting entities to the Financial
Information
Service and other relevant institutions, in accordance with provisions of this
Law, shall not be considered as a breach
of banking and professional
confidentiality.
12.2. Notwithstanding that the transaction to which a report relates was
established
not to have the purpose of money laundering or terrorism
financing, it is forbidden to impose administrative and criminal charges
against the reporting entity.
12.3. Neither the Financial Information Service nor a reporting entity is liable for
any damages arising
from the suspension of a specific transaction, in
accordance with Article 11 of this Law,
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12.4. If damages are inflicted on a
person or legal entity due to wrongful actions
undertaken by a reporting entity , and in violation of this Law, then the
damages
issue shall be settled according to the Civil Code.
Article 13. Confidentiality of reports
13.1. Reporting entities and the Financial
Information Service are prohibited from
disclosing information on clients' transactions to any other person other than
as provided
for in Article 7.4 of this Law.
13.2. The Director and Inspectors of the Financial Information Service shall not
disclose at any
time confidential information related to transactions.
Article 14. Internal monitoring of reporting entities
14.1. Reporting entities
shall develop and implement an internal monitoring
program to combat money laundering and terrorism financing. The program
shall
contain the following:
14.1.1. Policies and procedures on detecting suspicious transactions, security
and confidentiality of information,
reporting and transfer of
documents to the Financial Information Service and other relevant
entities;
14.1.2. Rules and procedures
for the appointment and discharge, of officers
who will supervise and monitor the implementation of laws to combat
money laundering
and terrorism financing, specifying the powers and
obligations of such staff and the implementation of the rules provided
for in
Article 14.1.1 of this Law.
14.1.3. Requirements for providing professional training for the staff provided
for in Article 14.1.2 of
this Law.
14.2. The program provided for in Article 14.1 of this Law shall be submitted for
registration to the Financial Information
Service.
14.3. Model rules for the purposes of Article 14.1.1 of this Law shall be approved
by the Governor of Bank of Mongolia.
Article 15. Transportation of money across the borders of Mongolia
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15.1. Travellers carrying between 5 and 20 million togrogs
(or its equivalent in
foreign currency in cash), across the Mongolian border shall declare truly the
amount of cash in customs forms.
15.2. If a person crosses the Mongolian border carrying more than 20 million
togrogs in cash (or the equivalent in foreign currency)
he or she shall make a
declaration to the authorized representative of the Financial Information
Service in the prescribed form.
15.3. A person who evades or objects to making a declaration or makes a false
declaration under Articles 15.1 or 15.2 of this Law
shall be liable as
provided for in the Law.
15.4. Declaration forms for the purposes of Article 15.2 shall be approved by the
Governor
of the Bank of Mongolia.
CHAPTER THREE
Financial Information Service
Article 16. Financial Information Service
16.1. The Financial
Information Service, whose functions will be to implement
laws to combat money laundering and terrorism financing, shall be
established
in the Bank of Mongolia.
16.2. The strategic plan and structure of the Financial Information Service shall be
approved by the Governor
of the Bank of Mongolia.
16.3. The Director of the Financial Information Service shall be appointed by the
Governor of the Bank of
Mongolia upon consultation with the Minister of
Finance.
16.4. The Director and Inspectors of the Financial Information Service shall
meet
the following requirements:
16.4.1. have served in banking, financial or legal professions for not less than
three years;
16.4.2.
have no overdue debts or liabilities;
16.4.3. have no criminal record
Article 17. Functions of the Financial Information Service
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17.1. The Financial Information Service shall have the following functions, in
addition to those provided for in Articles 10,
and11 of this Law:
17.1.1.receive, collect and analyze information reported from reporting entities as
well as information contained
in data bases of relevant local and similar
foreign institutions;
17.1.2.using reports from authorized institutions compile database
on suspicious
and cash transactions;
17.1.3.regularly report to the reporting entities and competent state institutions on
measures
taken by the FIS on the basis of reports on suspicious and cash
transactions;
17.1.4.develop, provide to and ensure the implementation
by reporting entities of
a methodology to monitor and detect suspicious transactions and examine
information related to money laundering
and terrorism financing;
17.1.5.disseminate information and raise public awareness to combat and prevent
money laundering and terrorism
financing;
17.2. Inspectors of the Financial Information Service have the power to examine
the implementation of the laws to combat
money laundering and terrorism
financing and to require rectification of any breaches of the Law by
reporting entities, or to make
recommendations to the competent
authorities for further action including the cancellation of special licenses.
17.3. Financial Information
Service shall monitor how reporting entities and
their officers fulfil their obligations imposed by this Law.
Article 18. Database
18.1. Financial Information Service shall have a unified database of information
compiled in accordance with the provisions of this
Law.
18.2. Rules on storage and use of information in the database shall be approved
by the Governor of the Bank of Mongolia.
Article
19. Cooperation with similar foreign institutions
19.1. Financial Information Service shall cooperate with foreign and
international
institutions which conduct similar activities and have similar
confidentiality requirements imposed by law.
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19.2. Financial Information Service
may provide the required information at the
request of the institutions provided for in Article 19.1 and in accordance
with the respective
Laws.
CHAPTER FOUR
Miscellaneous
Article 20. Cooperation Council
20.1. The Council, whose functions shall be to ensure the implementation
of
laws to combat money laundering and terrorism financing, to exchange
information, to prepare recommendations on preventative measures,
shall
be established at the Financial Information Service. The composition and
rules of this Council shall be approved by the Governor
of the Bank of
Mongolia.
Article 21. Liabilities to be imposed on those who breach the Law
21.1. If the violation of the Law to combat
money laundering and terrorism
financing does not constitute a criminal offence, then the Inspector of the
Financial Information
Service shall impose the following administrative
sanctions against the guilty person:
21.2. Official who violates the provisions
of Articles 4.3 and 5.3 of this Law
shall be imposed a fine up to 250.000 togrogs , a legal entity ­ a fine of up
to 1.000.000 togrogs;
21.3. Official who violates the provisions of Article 13 of this Law shall be fined
for up 500.000 togrogs, legal entity for up to
1.000.000 togrogs.
Speaker of Ts. Nyamdorj
the Great Khural
of Mongolia